The more effectively any business can manage the relationships it has with its customers the more successful it will become – period. Therefore, IT systems and processes that specifically address the problems of dealing with customers on a day-to-day basis are growing in popularity.
Your information, your knowledge is your DNA, regarding the external commercial world, the revenue side, salespeople and marketers are typically the custodians of this customer information. But what if a salesperson leaves? According to the Alexander Group, annual B2B sales department turnover is 13.9%. Which means that if you solely rely on salespeople to keep up with your customers, you’re also losing current client data (next step, last email, contacts, etc.) 13.9% of the time
Customer relationship management (CRM) is not just the application of technology, it is a business strategy to learn more about customers’ needs and behaviors in order to grow stronger relationships with them. As such it is much more of a business philosophy than a software solution to assist in dealing with customers effectively and efficiently. Nevertheless, at the heart of a successful CRM system, it relies on the use of technology.
This CRM guide outlines the business benefits and the potential drawbacks of implementing CRM. It also offers help on the types of CRM solution you could choose and how to implement them.
- Why use CRM?
- Business benefits of CRM
- Types of CRM solution
- How to implement CRM
- Reasons CRM implementation might fail
- Questions for CRM suppliers
WHY USE CRM?
In the commercial world (both for profit and not for profit I might add) the importance of retaining existing (brick walling) customers and expanding new business is paramount, hunting and farming in sales speak. The costs associated with finding new customers mean that every existing customer could be important. It has been estimated that the cost of acquiring a new customer is up to 6 times higher than retaining one you already have.
The more opportunities that a customer has to interact with your company the better, and one way of achieving this is by opening up channels such as direct sales, online sales, franchises, use of agents, etc. However, the more channels you have, the greater the need to manage your interaction with your customer base.
Customer relationship management (CRM) helps businesses to gain an insight into the behavior of their customers and modify their business operations to ensure that customers are served in the best possible way. In essence, CRM helps a business to recognize the value of its customers and to capitalize on improved customer relations. The better you understand your customers, the more responsive you can be to their needs.
Managing Customer Relationships can be achieved by:
- finding out about your customers’ purchasing habits, opinions and preferences
- profiling individuals and groups to market more effectively and increase sales
- changing the way you operate, to improve customer service and marketing – effectively each end of the sales cycle.
Benefiting from CRM is not just a question of buying the right software. You must also adapt your business to the needs of your customers, if you are successful to any degree then you do this already. Unless of course you have a product that customers really want and cannot buy anywhere else and have no competition – in which case where do I send my Resume? 🙂
BUSINESS BENEFITS OF CRM
Implementing a customer relationship management (CRM) solution might involve considerable time and expense. However, there are many potential benefits.
A major benefit can be the development of better relations with your existing customers, which can lead to:
- increased sales through better timing due to anticipating needs based on historic trends
- identifying needs more effectively by understanding specific customer requirements
- cross-selling of other products by highlighting and suggesting alternatives or enhancements
- identifying which of your customers are profitable and which are not
This can lead to better marketing of your products or services by focusing on:
- effective targeted marketing communications aimed specifically at customer needs
- a more personal approach and the development of new or improved products and services in order to win more business in the future
Ultimately this could lead to:
- enhanced customer satisfaction and retention, ensuring that your good reputation in the marketplace continues to grow
- increased value from your existing customers and reduced cost associated with supporting and servicing them, increasing your overall efficiency and reducing total cost of sales
- improved profitability by focusing on the most profitable customers and dealing with the unprofitable in more cost effective ways
Once your business starts to look after its existing customers effectively, efforts can be concentrated on finding new customers and expanding your market. The more you know about your customers, the easier it is to identify new prospects and increase your customer base.
Even with your years of accumulated knowledge, there’s always room for improvement. Customer needs change over time, and technology can make it easier to find out more about customers and ensure that everyone in an organization can exploit this information.
TYPES OF CRM SOLUTION
Customer relationship management (CRM) is important in running a successful business. The better the relationship, the easier it is to conduct business and generate revenue. Therefore using technology to improve CRM makes good business sense.
CRM solutions generally fall into the following four broad categories.
Application service providers can provide web-based CRM solutions for your business. This approach is ideal if you need to implement a solution quickly and your company does not have the in-house skills necessary to tackle the job from scratch. It is also a good solution if you are already geared towards online e-commerce.
Several software companies offer CRM applications that integrate with existing packages. Cut-down versions of such software may be suitable for smaller businesses. This approach is generally the cheapest option as you are investing in standard software components. The downside is that the software may not always do precisely what you want and you may have to trade off functionality for convenience and price. The key to success is to be flexible without compromising too much.
For the ultimate in tailored CRM solutions, consultants and software engineers will customize or create a CRM system and integrate it with your existing software.
However, this can be expensive and time consuming. If you choose this option, make sure you carefully specify exactly what you want. This will usually be the most expensive option and costs will vary depending on what your software designer quotes.
A half-way house between custom and outsourced solutions, this involves renting a customized suite of CRM applications as a tailored package. This can be cost effective but it may mean that you have to compromise in terms of functionality.
HOW TO IMPLEMENT CRM
The implementation of a customer relationship management (CRM) solution is best treated as a six-stage process, moving from collecting information about your customers and processing it to using that information to improve your marketing and the customer experience.
Stage 1 – Collecting information
The priority should be to capture the information you need to identify your customers and categorize their behavior. Those businesses with a website and online customer service have an advantage as customers can enter and maintain their own details when they buy.
Stage 2 – Storing information
The most effective way to store and manage your customer information is in a relational database – a centralized customer database that will allow you to run all your systems from the same source, ensuring that everyone uses up-to-date information.
Stage 3 – Accessing information
With information collected and stored centrally, the next stage is to make this information available to staff in the most useful format.
Stage 4 – Analyzing customer behavior
Using data mining tools in spreadsheet programs, which analyze data to identify patterns or relationships, you can begin to profile customers and develop sales strategies.
Stage 5 – Marketing more effectively
Many businesses find that a small percentage of their customers generate a high percentage of their profits. Using CRM to gain a better understanding of your customers’ needs, desires and self-perception, you can reward and target your most valuable customers.
Stage 6 – Enhancing the customer experience
Just as a small group of customers are the most profitable, a small number of complaining customers often take up a disproportionate amount of staff time. If their problems can be identified and resolved quickly, your staff will have more time for other customers.
REASONS CRM ADOPTION MIGHT NOT DELIVER IMPROVEMENTS
There are several reasons why implementing a customer relationship management (CRM) solution might not have the desired results.
There could be a lack of commitment from people within the company to the implementation of a CRM solution. Adapting to a customer-focused approach may require a cultural change. There is a danger that relationships with customers will break down somewhere along the line, unless everyone in the business is committed to viewing their operations from the customers’ perspective. The result is customer dissatisfaction and eventual loss of revenue.
Poor communication can prevent buy-in. In order to make CRM work, all the relevant people in your business must know what information you need and how to use it.
Weak leadership could cause problems for any CRM implementation plan. If you are going to do it – commit to it from the top to the bottom. The onus is on management to lead by example and push for a customer focus on every project. If a proposed plan isn’t right for your customers, don’t do it. Send your teams back to the drawing board to come up with a solution that will work.
Trying to implement CRM as a complete solution in one go is a tempting but risky strategy. This is especially true where other modules are included, such as service, marketing and ordering. It is sometimes better to break your CRM project down into manageable pieces by setting up pilot programs and short-term milestones. This depends on the amount of data involved and the complexity of your sales cycle.
Consider starting with a pilot project that incorporates all the necessary departments and groups but is small and flexible enough to allow adjustments along the way. Cross functional project teams can be very effective in this process.
Don’t underestimate how much data you have and will require in future, and make sure that you can expand your systems if necessary. You need to carefully consider what data is collected and stored to ensure that only useful data is kept.
Avoid adopting rigid rules, now I want to qualify this, only adopt rules that meet the needs of your customers, but when you do adopt them make sure everyone follows them. Rules should ALWAYS be flexible enough to allow the needs of individual customers to be met. Having said that make sure that you want the demanding customer – not every customer is a good customer.
QUESTIONS FOR POTENTIAL CRM SUPPLIERS
For many businesses customer relationship management (CRM) can be a significant investment. Therefore, it is vital to choose your supplier very carefully. Making the wrong choice could be expensive and even jeopardize your business. Before implementing a solution based on CRM technology, you might want to ask any potential suppliers the following questions:
- How long has the supplier been established?
- What are the specific costs associated with the product, i.e. a one-off purchase price, an annual renewable license, a charge per user etc?
- Does the supplier offer any form of evaluation software so that you can try before you buy?
- How much is charged for technical support?
- Does the supplier provide consultancy and, if so, at what rates?
- Is the system scalable? If your customer base grows will the system expand to cope?
- Can the supplier recommend any third-party developers that make use of their core CRM products?
- Is there an active independent user group where experience and ideas can be freely exchanged?
- Can the supplier provide references for businesses in your industry sector using their software?
- Are there other modules available that can be easily integrated?
- Does it offer training in the CRM solution and, if so, at what typical cost?
By way of a disclaimer I do supply and consult extensively on CRM solutions, I supply a system called 1CRM which in my experience offers the most complete, scalable and cost effective solution on the market. More than just a “sales CRM” system it is an integrated open source business management solution.
Original document, Customer relationship management, © Crown copyright 2009
Source: Business Link UK (now GOV.UK/Business)
Adapted for Bizblot by Terry Woolford
Biz blot, Dallas, Texas, USA